Analyst: 'It looks like they are trying to pad their top people’s wallets in case something really bad happens'

In the nine months since David Prystash was named Chief
Financial Officer of A123 Systems — the
battery manufacturer that received $390.1 million in federal and state subsidies — the company has laid off 125 employees and had a net loss of $172 million through
the first three quarters of 2011.

A123 Systems also learned earlier this month that the
company that was to be the main purchaser of its batteries — Fisker Automotive
— had its federal funding cut off for missing milestones and had to lay off its
own employees. A123 Systems had invested $23 million into Fisker.

Yet, this month A123’s Compensation Committee approved a $30,000 raise
for Prystash just days after Fisker Automotive announced the U.S. Energy
Department had cut off what was left of its $528.7 million loan it had previously received.

Prystash wasn’t the only executive to see a big raise this month. Robert Johnson, vice president of
the energy solutions group, got a 20.7 percent pay increase going from $331,250 to
$400,000, while Jason Forcier, vice president of the automotive solutions group, saw his pay
increase from $331,250 to $350,000. Prystash’s raise was 8.5 percent, going
from $350,000 to $380,000.

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The raises were reported by the company in its filings with
the U.S. Securities and Exchange Commission.

“It looks highly suspicious,” said Paul Chesser, associate
fellow for the National Legal & Policy Center. “It looks like they are
trying to pad their top people’s wallets in case something really bad happens.”

When A123 Systems announced it was opening its lithium-ion
battery manufacturing plant in Livonia in September 2010, then Gov.
Jennifer Granholm wrote about it on the Huffington Post calling it “a Recovery Act
success story.”

But there have been troubles for A123 Systems in the 17
months since then despite a lot of state and federal aid to prop it up.

The
state of Michigan gave it a $100 million MEGA tax credit that is contingent on
the company creating 300 jobs by the end of 2016. A123 Systems also received another $41 million in tax breaks and
subsidies from the state. The Department of Energy awarded A123 Systems a
$249.1 million grant.

But the company has not been able to meet its own
projections. For instance, on March 28, 2011 in an SEC filing, the company
projected total revenue between $210 million to $225 million for 2011. Its latest
report shows they had just $118 million of total revenue through the first
three quarters of 2011 and reported a net loss of $172 million.

A123 Systems has handsomely rewarded its executives since
2010, according to SEC filings.

For example, A123 Systems CEO David Vieau made $375,000 in
2010 and saw that increase to $450,000 in 2011, a 20-percent increase.

A123 Systems Spokesman Dan Borgasano referred questions for
comment to a Feb. 10 article in Crain’s Detroit Business
where Forcier said A123 Systems has hired back more than 20 employees who were
laid off and was looking to hire engineers.

On Feb. 6, Fisker Automotive had its federal
loan blocked by the U.S. Energy Department because it hasn’t met
milestones.

Obamacare repeal-and-replace is underway, and regardless of whether it passes or fails big, changes are coming for Michigan’s medical services and insurance industry, and the state’s social welfare system, especially Medicaid.

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